Just across the road from a statue of Pushkin, a handful of demonstrators have put up a modest sign. It reads simply: "Moscow is not Sodom." As a cold wind whips through the Russian capital's Pushkinskaya square, activists hand out leaflets showing two men kissing, crossed out in angry red ink with the slogan: "Say no to spiritual terrorism."

The demonstrators' ire is directed at an unlikely target – the 54th Eurovision Song contest. Russia is hosting the 2009 event on Saturday following the victory last year in Serbia of the mullet-haired Russian singer Dima Bilan. The protesters are not demonstrating against Eurovision as such, but against plans by gay rights activists to hold a parade in Moscow this weekend on the day of the final.

Moscow's mayor, Yuri Luzhkov, who memorably described gay pride events as "satanic", has prohibited all previous gay rights meetings. Several gay activists who took part in unauthorised rallies in 2006 and 2007 were badly beaten up in Moscow – among them Peter Tatchell, who was punched, kicked, left with severe bruising to the head, and then arrested, and the Right Said Fred singer Richard Fairbrass.

Tatchell says he is coming back to Moscow for Saturday's gay rights rally, called "Slavic Pride". Last week the mayor's office banned the event. "Saturday's Slavic Gay pride is about more than gay human rights. It is about the right of all Russian people to freely express their opinions and protest peacefully," Tatchell said, adding: "The ban on gay parades is just one example of the systematic suppression of civil liberties in Russia."

Nonetheless, there is now a distinct possibility that Russian nationalists and neo-Nazis will once again beat up gay demonstrators – as well as visiting Eurovision fans – in what would be a severe blow to Russia's international reputation and to Eurovision, already reeling from eastern European bloc-voting scandals. The Dutch Eurovision entrants, a three-man combo called the Toppers, have promised to boycott the final if the Moscow authorities prevent the march.

Few are optimistic that the rally will go off without trouble. "Groups of fanatics and extremists will be roaming the streets in the centre of Moscow looking for people to beat up," Nikolai Alekseev, the organiser of the Slavic Pride rally, told the Guardian. "Nobody will care. Moscow police will do nothing to protect them." Asked whether gay British fans should avoid travelling to Moscow this Saturday, he warned: "Everybody has to make their own choice. But they won't be safe."

That Eurovision has a wide gay following isn't much of a secret, even in Russia. "Lots of gays and lesbians are fans of Eurovision. It's a very gay event," Alekseev said. Germany's entrant this year, Oscar Loya, is openly gay, with his nationality – he's an American – provoking more discussion in Germany than his sexuality. Alex appears on stage with three blonde dancers wearing skimpy black knickers. His song is titled Miss Kiss Kiss Bang.

It is therefore something of a paradox that Moscow should be hosting the event – given that Luzhkov is the most homophobic mayor in Europe, and shunned by his peers in London, Berlin and Paris. In theory, Russia is obliged to allow gay rallies, and other gatherings, under its constitution. In practice, Luzhkov has outlawed every gay event, and recently dubbed gay people "weapons of mass destruction".

Russia's far-right and orthodox Christian groups yesterday made it clear they plan to given their own uncompromising response to any gay manifestation. "We won't allow this satanic gathering," Nikolai Dovydenko, the organiser of last week's anti-gay picket told the Guardian. "We don't want Moscow to become Sodom," he remarked. "It's an affront to Russian society and to our spiritual peace."

Asked whether his movement, the united orthodox youth, was plotting to use violence against gay and lesbian Eurovision fans, he replied: "We don't want to hurt anybody physically. But we will not let our feelings be insulted." The group's leaflet mixes images from previous gay parades with photos of terrorist attacks. "Eighty per cent of Russians are orthodox Christians," Dovydenko said. "We don't intend to be humiliated."

According to Alekseev, Russia remains one of the most intolerant countries in Europe towards gays and lesbians – despite the fact the Kremlin repealed the Soviet law criminalising homosexuality in 1993. There are now 10 cases pending in the European Court of Human Rights against Russia, which has never allowed a gay rally. Discrimination and attacks on gay people are frequent, Alekseev said.

Popular attitudes in Russia towards gay people are summed up by the treatment meted out to Boris Moiseyev, one of Russia's few openly gay singers. His concerts are frequently cancelled; at one point a monk lay down at the entrance to a hall where he was playing in an attempt to prevent spectators from watching his show. In January Moiseyev announced he wanted to be Russia's 2009 Eurovision entry. But the spot was given to the well-connected singer Anastasia Prikhodko.

Last week Luzhkov's spokesman said that the mayor was justified in taking a tough line on gay protesters, who threatened the "moral pillar" of Russian society. "They are seeking to deliberately provoke disorder, which would threaten the lives and security of Muscovites," Sergei Tsoi declared. Tsoi added: "This is absolutely unacceptable. The Moscow government declares that no gay parades have been and will be held in Moscow."

The 2009 Eurovision contest officially got under way on Sunday, inside the giant membrane-roofed Olympiskiy complex, which was originally built to host the summer 1980 Moscow Olympics. Vladimir Putin, Russia's prime minister appeared briefly on the Eurovision stage together with Azerbaijan's Eurovision entrants, Aysel and Arash. In November Putin apparently told the composer Andrew Lloyd Webber that he is ready to vote for Britain.

The UK's 2009 Eurovision contestant, Jade Ewen, began rehearsals in Moscow last weekend, and is performing a song written by Lloyd Webber and Diane Warren. Her set includes a white grand piano and four classical violinists dressed in coattails. Jade has virtually no chance of success, given the tactical voting at Eurovision by former Soviet bloc and Balkan nations - a phenomenon that last year prompted Terry Wogan to resign in disgust from his job as Eurovision presenter. Graham Norton is this year's new UK's Eurovision host.